Mercury profit drops 20 per cent

Electricity provider Mercury’s half-year profit has slumped by $21 million due to dry conditions in Waikato and the sale of its smart meter business, its chief executive says.

For the six months to December 31, Mercury recorded an after-tax profit of $83m, down from $104m in the equivalent period in the 2019 financial year.

It also downgraded its 2020 full-year earnings guidance from $510m to $500m due to dry conditions in the Taupo¯ catchment.

Mercury generates and distributes renewable electricity. It owns and operates nine hydroelectric generating stations on the Waikato River and five geothermal plants in the Taupo¯ area.

Mercury said it lost 16,000 customers due to a strategy focused on customer value rather than growing customer numbers.

Mercury shares dropped 5 per cent after opening yesterday morning, trading at $5.14.

Chief executive Fraser Whineray, who leaves the company for Fonterra in March, said while profit was down, when adjusted for lower generation and the sale of its metering business Metrix the result reflected ‘‘strong execution’’ across the business.

In December 2018 Mercury sold its smart-metering business Metrix to intelliHUB Group for

$270m.

Generation in the first half of the 2020 financial year reduced by

10 per cent due to drier conditions in Waikato and scheduled maintenance on several geothermal stations.

Hydro generation was down

12.5 per cent and geothermal generation

Fraser Whineray Mercury chief executive

was down 5 per cent.

Whineray said it expected ‘‘ongoing challenging wholesale conditions’’ due to national thermal fuel and transmission constraints.

‘‘Intense competition in retail and strained retail margins will continue to be a feature. I also anticipate further competitor decisions on new generation development and retirement,’’ Whineray said.

The company would pay shareholders an interim dividend of 6.4 cents per share and dividend guidance for the full year remained at 15.8 cents per share.

Former Trustpower chief executive Vince Hawksworth would take over as Mercury chief executive in late April.

‘‘Intense competition in retail and strained retail margins will continue to be a feature.’’